The real bonus scandal

There was much irony and turning of tables at Whitehall this week. Yesterday, the Telegraph reported that more than 1,000 senior civil servants would receive bonuses of up to £20,000 this summer. According to Dame Helen Ghosh, Permanent Secretary of the Home Office, the sums are “not exactly big bucks”. The total cost to the taxpayer is estimated at £10 million. Well, a mandarin’s stay in Santorini is better value for money than, say, the fire brigade, right?

At issue are the hypocrisy and merits of awarding the bonuses. One of the most useful verses I’ve retained from Sunday school is Matthew 7:5, “Thou hypocrite, first cast out the beam out of thine own eye; and then shalt thou see clearly to cast out the mote out of thy brother’s eye.” Ministers had called on officials not to take their bonuses but were dismissed. Big bonuses. Bad timing. Shamelessness. Sound familiar? The government should not impose a super-tax against banker bonuses while it keeps its own bureaucrats on the gravy train. There is less call to meddle in the private sector than to get their own house in order.

It is also unclear how effective the bonuses are as performance incentives. The Ministry of Defence has experienced its fair share of scandal this year, with £6.3 billion in assets unaccounted for, and yet its officials will still receive bonuses. If bonus grants are unresponsive to serious controversies like that, then there appears to be little link between performance and reward.

A Cabinet Office spokesman said on Wednesday that the Coalition government plans to “restrict bonuses for senior civil servants to only the top 25 percent of performers.” This is a move in the right direction. Performance-based incentives, when they actually tie performance to reward, increase productivity. They might well be used to make departments more cost-effective. To achieve this, though, the Coalition must be prepared to reduce salaries and marry bonuses to measureable success.